Economic Growth Hinges on Housing Prices

by Rob Wicker

The influential Kiplinger Letter reports that housing prices are the key to a growing economy. If between now and spring housing prices decline by 10% on average, the Gross Domestic Product will shrink. Even though the situation is dicey, Kiplinger’s opinion is that prices will retreat by only 3%, and we won’t slide into another recession. 

Still, the economy is stuck in an unpleasant cycle: a sluggish GDP results in too few jobs created to boost the demand for housing. Unemployment is also the primary reason for new foreclosures coming on the market. These foreclosures result in lower real estate prices, resulting in fewer homes being built, leading to fewer jobs created…and so on.

Hang in there, the picture will improve. Kiplinger anticipates that existing home sales will rise slightly in 2011 and mortgage rates will remain low. 

Make sure your prospective buyers understand that the first six months of 2011 may be their best opportunity to get a great price on a home.

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